1.0 Introduction
In a federation, responsibilities are shared between the component parts of the federation, so also are tax strength which are the source of revenue to carryout these responsibilities, but unfortunately there is always a divergence between the criteria for sharing these constitutional responsibilities and which is used to share the tax powers.
The essence of revenue allocation therefore is to attempt to correct this unbalance between the expenditure obligation and the revenue services. In view of these, revenue allocation therefore refers to the criteria, process and method o f sharing federation's financial resources among the various tier of government in the federation in such a peaceful way that guarantees development, progress and enhances unity.
The case of Nigeria involves sharing the federal revenue and other resources, firstly among the three tiers of government in a vertical allocation which deals with the sharing of the revenue among the three level of government, where it determines what share goes to the federal government, state government and local government and then among the units of a particular tier in a horizontal allocation, where it involves how to share the allocation to each level of government to its members. For instance how to share the allocation for state to the states in the federation.
The critical issues involved in revenue sharing in Nigeria include, to determine how much independent source of revenue should be given to a tier of government to enable it execute its responsibility and to determine how the federation accounts should be shared, the distribution of federation finance is not restricted to direct allocation to government, there is also special funds for specific projects or programs. The majors issues involved in horizontal allocation include the criteria for sharing.
The principles and criteria for these allocation are determined by the National Assembly for vertical allocation between various layers of government and horizontal allocation among the state government on their own behalf and on behalf of the local government and the state house of assembly (for horizontal distribution among local government within the state) or any other similar bodies vested with such responsibility, such principle when established become the basis for revenue allocation. Though these could vary from one nation to another.
1.1 Statement of Problem
The issue of revenue allocation in Nigeria and its expenditure has generated a lot of arguments, due to the fact that the principle of equity advocates that centrally collected resources should be shared equally among the states while the derivation principle does not take account of the peculiar features of each state, its existing stock of assets and existing facilities of each state.
It enhances rather than reduce the pace of uneven development in the country where states which contribute highly to the central fund will continue to have great access to allocated funds and will continue to develop while other states will continue to lag behind. This however possesses great challenges to the corporate existence of the federation and analyst are not left out in these challenges to examine the process or procedure of allocating revenue to the states in the country (Nigeria).
To this end, the problem of this research work becomes to ascertain the trend of revenue allocation and its expenditure to states as well as to determine the degree of relationship between revenue allocated to the state and its local government and if there is fluctuation on these revenue allocation.
Generally the main task of this research work is to gather information of sufficient quality and quantity to provide basis for making sound inference for decision making.
1.2 Aims and Objective of the Study
Since the purpose of revenue allocation is to correct the divergence between the constitutional obligation of the different tiers of government and their other revenue sources.
The statistical analysis on revenue allocation Imo state is aimed at achieving the following objectives.
- To investigate the trend of revenue allocation and its expenditure in Imo state from 1999 — 2005 using regression analysis.
- To ascertain whether there is any significant relationship between revenue allocated to the state and its expenditure in the state. Using simple correlation co-efficient.
- To determine if there is quarterly variation on revenue allocation to the state and its expenditure.
- To make necessary recommendation based on findings made and suggest ways to the federal government towards improving on the revenue allocated to the states.
1.3 The Significance of the Study
Considering the fact that the principle of equality in revenue allocation in Nigeria, demands that all state are treated as equals because each is required to perform certain minimum functions, since no state is deemed superior to the other.
This research work will be of great significance in the following ways.
- To ascertain true relationship existing between revenue allocated to the state and its expenditure, so that the state will have true relationship obtained through sound statistical analysis not depending on mere guess work
- Also since the study seeks to estimate the trend of revenue allocated to the state from 1999 — 2005. It will enable the state to know whether there is decline or increase in the allocation in order to advocate for more allocation.
- The survey will as well assist the decision makers in the state and the ministry of finance of Imo state to realize the importance of keeping data up-to-date and the need of employing well trained statisticians which will as well reduce unemployment rate in the state.
